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Startup America Gets a Do-Over

Startup America Gets a Do-Over
Entrepreneur Charlotte Creech along with Steve Case, the chair of the Startup America Partnership, rang the opening bell at the NYSE in celebration of Startup America's one-year anniversary.

On the one-year anniversary of "Startup America," the White House's sweeping public-private effort to bolster high-growth companies, President Barack Obama has issued a new call to give entrepreneurs a leg up -- but some critics suggest that the effort is all but useless.

The President today sent Congress a new batch of small-business enhancing measures -- collectively called the Startup America Legislative Agenda -- which he hopes will expand tax relief and shore up capital for startups and small businesses that are creating jobs. The roughly $48 billion agenda would also seek to attract and retain foreign-born entrepreneurs and skilled immigrants to the U.S. 

"I urge Congress to send me a common-sense bipartisan bill that does even more to expand access to capital and cut taxes for America's entrepreneurs and small businesses," the President said in a statement.

Among other things, Obama would give small businesses that hire or boost wages in 2012 a 10 percent tax credit on new wages. He also called on Congress to permanently double the amount of start-up expenses entrepreneurs can deduct from their taxes to $10,000 from $5,000 and extend to 100 percent the first-year depreciation for the purchase of qualified property placed in service before Jan. 1, 2013.

The President would also expand the Small Business Investment Company program to allow for up to $4 billion in annual support. And he called for what's being referred to as an "IPO on-ramp" program, which would change how current securities laws and regulations are phased in for small companies and startups in their first years after going public. Obama also proposed creating a national framework for entrepreneurs and small businesses to raise capital through "crowdfunding," a type of investment regime that asks for typically small amounts of capital from strangers.

Although a number of the President's proposals have already won bipartisan support in the past, some critics suggest that passage is unlikely in an election year. "Given the opposition to the payroll-tax cut, obviously [the President] doesn't have the cooperation of Congress," says Dean Baker, co-director of the nonpartisan Center for Economic and Policy Research in Washington, D.C. He added that this latest announcement is nothing more than a wish list. "Republicans don't want to give him any key victories before the election."

What's more, a number of last year's more prominent measures still haven't won approval -- or they're being held up for one reason or another. The U.S. Small Business Administration's $1 billion early-stage investment fund, which aims to invest in businesses that need between $1 million and $4 million in financing won't begin until later this year. And while the SBA has dedicated $1 billion toward new state funds aimed at helping improve capital access, the agency has so far launched only one Impact Investment Fund in Michigan, providing just $130 million in capital to high-growth businesses.

And at least one of the measures contained in today's legislative agenda was also included in last year's Startup America package and still hasn't received a green light. The permanent elimination of the capital-gains tax on certain small-business stock held for more than five years needs Congressional approval to proceed. A similar capital-gains tax provision was passed in 2010 but expired last year.

"It is the case that there are individual provisions that have moved in one House [of Congress] or another," says Gene Sperling, director of the National Economic Council. "What the President was doing by putting forward this legislation is to put together a core of small business and capital access programs… into one package to gain bipartisan support."

To be sure, many of last year's Startup America provisions have not only gone forward but are also informing these latest proposals. For instance, the Treasury Department was charged with hosting a conference last year that looked into small businesses' access to capital. And the ideas stemming from that conference helped construct the President's current proposal on easing small and young companies' entrance into the public markets, according to Mary Miller, the Treasury's assistant secretary for financial markets.

Further, the private side of last year's Startup America package seems to be making progress even though the chief private initiative -- dubbed the Startup America Partnership -- launched only in September. In 2011, a number of initiatives rolled out to aid small businesses, including mentorship programs and entrepreneurship courses provided by nonprofits and corporations.

And despite the slow start, the Startup America Partnership -- which is aimed at spotlighting entrepreneurs, helping them connect with resources and supporting regional startup ecosystems -- has attracted nearly 3,000 high-growth firms and more than 50 business partners like Hewlett-Packard and Intuit. To date, those companies have collectively made more than $1.2 billion in in-kind commitments to the program, which is chaired by Steve Case, the co-founder of AOL. And just today, nine new regional chapters have signed on -- bringing the tally to 17.

Entrepreneur Charlotte Creech called her experience with the Startup America Partnership instrumental. As the CEO and co-founder of Combat2Career, a West Simsbury, Conn.-based online service that connects veterans with higher-education opportunities, she reached out to one of the regional divisions of Startup America. The director of the Connecticut program arranged not only for Creech and her business partner to attend vital networking events, but also make connections to high-level government officials. "These connections have been instrumental in helping us spread the word, gain support and establish credibility," says Creech, who has so far raised more than $225,000 in funding to develop the web portal.

Only time will tell how effective the program overall will be for entrepreneurs, Steve Case told Entrepreneur.com from the New York Stock Exchange where he and startup founders participating in the program rang the opening bell yesterday. "I think for the first year, we made great progress."

Diana Ransom is deputy editor of Entrepreneur.com.
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